Estimate Your Retirement Income Needs

It's likely that you'll need at least 70 to 80 percent of your pre-retirement income to maintain your standard of living during retirement. Here's a suggested formula for calculating the amount of income you'll need:

[average annual income over the 10-year period prior to retirement] x .70 = bottom of range

[average annual income over the 10-year period prior to retirement] x .80 = top of range

A couple earning an average of $60,000 per year, for example, would have to earn between $42,000 ($60,000 x .70) and $48,000 ($60,000 x .80) per year during their retirement to sustain their current lifestyle.

Obviously, your specific situation dictates the amount of money you'll require. Typically, retirement age triggers a number of changes in your spending patterns. For example:

You may have paid off your mortgage.

Your children may have finished college and moved away.

Health care costs may use up a greater portion of your income.

You may have to pay more to make sure your insurance needs have been met.

Spending on leisure activities, such as travel, entertainment or hobbies, may increase significantly.